Mortgage rate moves up to 4.28%

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What's happening with mortgage rates? We asked Jeff Lazerson, of Mortgage Grader in Laguna Niguel, to give us his weekly take.

RATE NEWS

From Freddie Mac's weekly survey, the 30-year fixed rate moved higher for the second week in a row to 4.28 percent and 0.7 point from last week's 4.23 percent and 0.7 point. And, the 15-year fixed rose 2 basis points to 3.33 percent from last week's 3.31 percent.

BOTTOM LINE: In the past year – assuming a well-qualified borrower received the average 30-year conforming fixed rate on $417,000 – you would have saved $216 had you funded your loan a year ago on the previous rate of 3.37 percent and payment of $1,842 compared to today's rate of 4.28 percent and payment of $2,058. Today's 15-year fixed rate of 3.33 percent and monthly payment of $2,946 is $134 higher than last year's payment of $2,812 on the previous rate of 2.66 percent.

APPLICATION NEWS

The Mortgage Bankers Association's weekly survey reports a less than 1 percent gain in loan application volume from the previous week. Refinance applications represent 66 percent of all home loan requests. The California Board of Equalization reports a 4.3 percent increase in property assessments totaling more than $4.6 trillion for the golden state. Orange County increased by 3.6 percent.

WHAT I SEE: From rate sheets hitting my desk that are not part of Freddie Mac's survey: Locally, well qualified borrowers can get a popular piggy-back home equity line of credit loan by having at least 10.1 percent equity or down payment and avoid PMI insurance altogether. The rate on the HELOC is 5.24 percent interest only for 10 percent of the property value. The first mortgage is for 80 percent of the property value at a rate of 4.5 percent and no-cost. Compare this to paying PMI on 90 percent of the property value which adds roughly 0.5 percent to the rate on the entire loan balance. The PMI is not deductible if you make $110,000 or more a year. That's a deal indeed.

WHAT I THINK: It's very uncomfortable telling anyone, millionaire or first-time buyer, that he or she doesn't qualify. I've had to break the bad news to three millionaires this year and a boatload of others. You can't mail in assets to make your house payment. Income, broken down on a monthly basis, is what qualifies you when it comes to determining your housing and debt ratios – not to exceed 50 percent of your income, currently.

There's a new program called Asset to Income Mortgage Acceleration Program approved by Fannie Mae that may help those on the wrong edge of the 50 percent qualifying ratio. The critical condition is you must put at least 20 percent down or have 20 percent equity in the case of a refinance. This program allows you to create an income stream that provides more qualifying income to you on a monthly basis from your savings, cash value of life insurance, stocks, gift of funds from your rich uncle, etc.

You can be a spring chicken or retirement age, it does not matter. You'll need to put your funds into a five-year annuity called a Single Premium Immediate Annuity. The downside is the SPIA contract is irrevocable once activated. And there will be some type of commission charged (typical of annuities) as nothing is for free in this world. If you are in the market for a home and you have champagne tastes but a beer income to qualify for that slightly out-of-reach payment, this just might be able to get you under the 50 percent hump and qualify you for your dream home.

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